Brokerage firm analyst sees Apple Services alone worth $111-$177 a share by 2020

Apple has already let it be known that it has a goal to increase its Services revenue from $30 billion during fiscal 2017, to $50 billion by fiscal 2020. Jefferies analyst Timothy O'Shea told clients in a note today that he sees the Services division contributing as much as 25% of corporate revenue and 40% of gross profit by 2020. The analyst figures that the Services business deserves to be valued higher than Apple's low margin hardware business. As a result, O'Shea sees Apple Services alone worth $111 to $177 a share in two years.

CNBC notes that the analyst initiated coverage of Apple today as a "buy," pointing out that the iPhone serves as a "foundation" from which the company can "build a massive, recurring and high margin Services business." O'Shea says Services growth will be led by paid apps purchased from the App Store, and from Apple Music subscriptions. He also sees Apple adding new services over the coming years.

Jefferies has a one-year price target on Apple of $265. The shares closed today at $212.24, so the target price would represent a 25% gain from the current price.